South Africa beefs up social security system

South Africa's plan to reform its social security system will improve the regulation of the multibillion rand retirement sector and protect contributors' savings, finance minister Trevor Manuel said on Friday.

South Africa's plan to reform its social security system will improve the regulation of the multibillion rand retirement sector and protect contributors' savings, finance minister Trevor Manuel said on Friday.

The government has proposed that all formally employed workers contribute a portion of their salaries to a state-run retirement fund in an effort to reduce dependence on the current government pension plan. Subsidies will be provided in cases where earners make too little to contribute.

"About two-thirds of the country's working population retires with no provision and then depends on the social grants," Manuel said.

Manuel has previously lamented the growing fiscal burden of providing social grants, including the R870 a month retirement payment to some 11million South Africans, saying it was not sustainable.

The government also wants the R74,4billion private retirement industry to become more competitive and do a better job of protecting clients' contributions to funds, South African officials said.

The sector came under fire last year from the government's pension fund adjudicator for levying excessive charges on consumers and not properly disclosing these costs. Some of the big industry players were fined as a result.

Manuel stressed that the government wanted to take a collaborative approach in its social security reforms.

"But we want to work hand in hand with the retirement industry. It's a big industry we don't want to mess with," Manuel said.

The government has said that it is taking action partly because South Africans do not save enough for retirement.

The government has not said how much individuals will contribute to the new retirement scheme because its draft proposals must be discussed with the retirement industry, unions, employers and other stakeholders. - Reuters

X